Where do your Savings Go? Where does your Investment Go? How does the Economy Work?
1) In India the Savings Rate is high.
2) Most people Save more and Spend less
3) So where does their Savings Go?
4) The Point to note is even if you have saved
Rs 1 Cr., you can never withdraw this amount in Cash.
5) Max Cash you can withdraw is Rs 50 K that too from Current Account
6) So where does all our Money Go?
7) We invest either in Banks or Mutual Fund
8) These institutions aggregate retail money and lend to industry / economy. The industry uses the money to grow their business. They ensure their profits cover the cost of borrowing leaving behind profits for investors
9) On the borrowing side are customers taking loan for buying cars, homes and other things.
10) Because they Borrow or Take Loans, they Create Demand and their Demand runs the industry and the Profits of the industry ensures Returns for Investors
11) So a few take aways
12) Because people spend money, the economy runs. So consumer spending is the reason we make returns. So Spending Isn’t Bad (in fact the reason for Returns)
13) So stop giving gyaan to people to reduce their spending because spending drives the economy
14) Even the industry spends. They buy raw material, hire people, buy land and machinery, buy consumables and using this make new products which are purchased either by other businesses which is B to B or by people at large which is B to C
15) So buying is a key factor for earning Returns
16) An Economy that does not have buyers will not produce returns and will come to a grinding halt
17) Money has no value if not in circulation
18) A Few of Us who Mindlessly Save, enjoy the joy of Returns because others in the ecosystem are spending
19) Whether you want to succeed in business or life, the ultimate truth is to balance savings / investing and spending
18) A Business Man or Practitioner cannot ever Succeed if he is afraid of Spending
19) Therefore as an MFD, your success depends upon how you spend your wealth too
20) For Example by spending less on your business and investing your money in Mutual Funds you are helping others to grow their business at the cost of your own business